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USDJPY: Some People Just Don’t Get It

It’s been a while since the dollar is in free-fall mode against (and not only) the Japanese Yen and yet, many traders keep buying it again and again, expecting the BoJ to intervene and save their positions (at least once in a while).

And here are some charts and recent positions stats (courtesy of Oanda):

JPY Sentiment (Click to Enlarge)

I guess that the charts and figures above speak for themselves.

What’s interesting is that these buyers are not “new”. They’ve been doing the same thing for months: Jan 31, Feb 16, Feb 24, Mar 14 etc. I just picked some random days – you can check more (note: in the linked posts, “strong short” means the buyers percentage and data was collected from FXCM)

“Insanity: doing the same thing over and over again and expecting different results.” – Albert Einstein

And here is where we stand now:

JPY Sentiment (click to enlarge)

As you can see in the images above, around 80% retail speculators are going against a multi-year bear market and are suffering the consequences. If we look at other instruments which are in strong trends too, such as Gold, we notice that the things are a bit different: traders are actually following the market, although it is trading at record highs.

So the question here is: why aren’t the traders going against other well-established and strong trends, such as those of Gold and AUDUSD? The answer is pretty simple: Because of a few interventions in the past years, including the “big” G7 coordinated intervention in March – people started to believe that it’s safer to bet against extreme levels, feeling there’s a big fellow – Japan’s Central Bank – watching and being prepared to do all it takes to weaken their currency.

Now let’s see what bigger boys do:

COT Japanese Yen 7-31-2011

Above is the Yen Futures chart (USDJPY upside down) and the COT data. It’s the green line that matters here, as there’s where money and know-how is. These are the market followers and it seems that they don’t live in a fairy tale where a good dragon (the BoJ) comes to the rescue and saves the young prince (retail speculator).

My point here is that there will be interventions – no doubt. Not one but more. When? Probably soon – but we don’t know, nobody knows and it’s best we don’t even bother trying to anticipate an intervention. It’s not worth it, really. What’s the big deal when you lose 10-30 trades (or more?!) in a few months just to make sure that you catch the beginning of a move in your favor /or a crazy price spike – IF (big IF here) the Bank of Japan steps in the market?

It’s not the volatility that is causing beginners to lose money. It’s not the “evil” stop-hunting broker, neither leverage, nor their bad trading tactics. But what?! – It’s just their own attempt to OUTSMART the biggest market!

It’s like playing soccer alone against Brazil.
Or like playing chess against Kasparov. Drunk.
Or kicking Mike Tyson’s ass in the ring.

… and the list can continue. What are the odds?

And speaking of banks “helping” traders, maybe a bit off-topic here and not related to JPY or the BoJ – but just a bit of common sense: When was the last time a bank actually helped anyone (let’s say a small customer) to make money? – unless someone is living on a different planet, I guess it’s the other way around.

Hope it helps to change the number of perma-buyers from 82% to 81.999%

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